Paul Stanfield, chief executive of the Federation of European Independent Financial Advisers, said in a statement over the weekend that FEIFA has in the past cancelled memberships in the organisation “and/or not allowed renewal” by firms that have failed to meet its standards for membership; and that raising advisory standards across Europe remains “one of FEIFA’s stated goals”.
But he stressed that FEIFA, being a non-profit trade organisation with fewer than 35 members, has limited resources with which to police the industry, and said regulators around the world as well as providers of investment products “also have a major role to play in lifting standards”.
“It is very much an ongoing project,” Stanfield added.
“It is probably fair to say that the international marketplace is perhaps not yet quite ready for, or able to cope with, the standards that we would ideally (and ultimately) wish to see; hence our desire and continued efforts to achieve that goal.”
Stanfield’s statement came as some popular financial advisory industry discussion groups on LinkedIn came alive at the end of last week, and over the weekend, as advisers and some product providers posted allegations about how certain advisory firms operating in Europe may be doing so outside of the remit permitted to them by their licensing, and debated ways this practice might be brought to an end.
EU regulations permits some passporting of services across borders, but, these critics say, some firms are mis-using this passporting facility, which they say could leave their clients vulnerable.
Others, they claim, are overcharging their clients on commissions, and otherwise abusing their positions as wealth advisers.
Stanfield says FEIFA does not want such firms among its membership, and that it does its best to ensure its members operate strictly within the limits permitted to them by their individual licences. But he stresses that FEIFA is incapable, given its modest size and resources, to be the policeman that the industry clearly wants it to be.
‘We are not a regulator’
According to Stanfield, whenever FEIFA obtains or is given information that suggests a member company is acting "outside of its licensing remit," the organisation "always investigates, and takes action if necessary".
“We obviously vet our members when they apply for membership and also at each annual renewal – we also monitor their ongoing activities to the best of our abilities,” he added.
“It is important to realise, however, that we are not a regulator.
“There is, in my opinion, a strong argument for many of the regulators around the world to start taking a less light touch approach to their roles and responsibilities – thus helping to raise standards through more relevant and robust compliance frameworks.
"We feel that as well as regulators, the main international providers also have a major role to play in lifting standards, particularly with regards to policing the use of compliant products by appropriately licensed professionals.
“The international life companies appear to have become increasingly diligent in this regard in recent years, but this is also an ongoing scenario, and one where we hope to see better standards insisted upon and adhered to.”
Stanfield noted that FEIFA has “strong relationships with many of these life companies” as well as with the Association of International Life Offices (AILO), and that it is hoping to work with them “to create an increasingly professional international IFA sector”.
“Raising the standard of advice across the world is obviously of great importance – the major regulatory changes in the UK and other countries in the last year or so are evidence of this fact,” he said.
Expats not on regulators’ radar
One fundamental problem with respect to regulation not only in Europe but elsewhere as well is that few countries pay much attention to overseeing firms that technically might fall under their regulatory remit, yet cater not for the country’s local citizens but for expatriates, Stanfield noted. In some countries, he added, language differences “can and definitely are an issue” that can act as a disincentive for regulators to monitor the dealings of expat firms.
Stanfield declined to name the companies which have had their FEIFA memberships cancelled or which were not permitted to renew them in the four years since FEIFA was founded, noting that confidential matters between FEIFA and the companies in question are often involved in such cases.
Separately, in response to a question about the apparent recent departure from FEIFA of founding member firm Guardian Wealth Management (GWM), he said only that “it would be fair to say that there was a simple but significant disagreement between Guardian and FEIFA, with regards to a third party, and this led to Guardian leaving FEIFA”.
David Howell, chief executive of Guardian Wealth, confirmed that GWM "agree to disagree with FEIFA on matters relating to a third party", but added that the company’s board had taken the decision to leave FEIFA at the end of last year anyway, "as we are moving further away from Europe" and in the direction of "other areas of the world". The company recently moved into Qatar and Hong Kong, and Howell has previously said he was interested in expanding into such markets as Malaysia, Singapore and Mainland China.
"We have enjoyed our association with FEIFA, and we wish them well for the future," he added.
To read how "out-of-pocket expats" have been seeking redress for money lost due to poor investment advice, click here.
To read how some experts believe the problem of "spank shops" might be solved, click here.
To read how a small but some say growing number of expat-focussed advisory firms are seeking to be regulated by the Thai Securities and Exchange Commission, click here.
